Oil sector reform cannot be guided by market vagaries: Pradhan

Following the announcement of the new Hydrocarbon Exploration Licensing Policy (HELP) at a time of low crude oil prices globally, the government said on Friday that policies to enhance India's energy security could not be determined by market vagaries.

"Policies cannot be linked to what is currently happening to the oil market, which we all know is down," Petroleum Minister Dharmendra Pradhan told reporters here, saying he was being constantly asked over the last 20 months about a new policy for exploration.

"Policy and market are two different things, and we have to think long term about reform. HELP is perhaps the first structural policy reform in the sector after India's Independence," he said.

Responding to a query on whether oil producers needed to be incentivised through tax concessions in the current depressed scenario for investments in the sector, Pradhan said that HELP signifies a "paradigm shift" in the contractual and fiscal model for awarding oil and gas acreages.

HELP, approved by the union cabinet on Thursday, replaces the existing profit-sharing arrangement for hydrocarbon blocks to be commercialised from this year with a revenue-sharing formula, which may help prevent future disputes over pricing and cost recovery of the kind the government has been embroiled in with Reliance Industries Ltd (RIL).

It also put in place a single licence framework for oil, gas and coal-bed methane exploration in the country.

The government also freed gas pricing from the new blocks and existing discoveries which are yet to commence production. However, to protect user industries, the government is putting a price ceiling derived by a formula linked to the weighted average cost of imported fuels.